EXPLORATION 1999 — EXPLORATION 1999 — Pangea well-placed in Tanzania — Kahama-Buzwagi, Golden Ridge among junior’s advanced projects

Toronto-based explorer Pangea Goldfields (PGD-T) is protecting itself from the downturn in gold markets by focusing on joint-venture projects in Tanzania, Peru and Canada.

The company, which has no debt and $10 million in cash, plans to spend $3 million on exploration this year while its partners, footing most of the bill, are committed to spending another $11 million.

“To fund exploration we generally prefer to dilute a property interest rather than dilute our shareholders’ interests by issuing new shares,” says Pangea President Jean-Charles Potvin. “And by electing to use the portfolio approach, we balance the odds of making a mineral discovery while mitigating risk.”

In 1992, at the forefront of the wave of foreign companies now active in Tanzania, Pangea acquired a large land position in the Archean greenstone belts of the Lake Victoria Goldfields region, southwest of Mwanza.

The region consists of an inner belt of mafic-to-felsic volcanic rocks that host several deposits, including Buckreef and Bulyanhulu, as well as an outer belt of banded-iron-formation (BIF) and clastic-sediment rocks that host deposits such as Geita, Kukuluma, Ridge 8 and Golden Pride. Both belts are intruded by granites that are weakly metamorphosed and regionally deformed.

Pangea’s Tanzanian properties now cover 3,400 sq. km. and are held in 37 mineral concessions, three of which are wholly owned, with the remainder held under joint-venture agreements.

Since the early 1990s, Pangea and its partners have discovered five gold deposits — Kahama-Buzwagi, Golden Ridge, Tulawaka, Kanegele and Mgusu — while outlining more than 4.7 million oz. gold, of which 2.2 million oz. are attributable to Pangea. The junior also holds several less-advanced projects, including Bulyanhulu South and Kakindu.

n Kahama-Buzwagi — Situated 150 km south of Mwanza, the Kahama-Buzwagi project consists of 12 licences that cover a gold-bearing shear zone coincident with a 1.2-by-0.5-km gold-copper geochemical anomaly.

The project is a 30-70 joint venture between Pangea and operator Anglogold (AU-N). Under an agreement originally signed with Anglo American (ANGLY-Q) in 1995, Anglogold can maintain its interest by completing a bankable feasibility study by July 2001 and arranging project financing. (Anglogold was formed in June 1998 by amalgamating Anglo American’s gold assets into a single independent company.)

In part to compensate for Anglogold’s reticence in releasing resource estimates, Pangea retained Toronto-based Roscoe Postle Associates last year to calculate the resources of the main deposit, Chocolate Reef. Using Anglogold’s data and a cutoff grade of 1 gram, the consulting firm estimated resources, down to 170 metres, of 19 million tonnes at 2.85 grams gold per tonne. This is equivalent to 1.75 million contained ounces. Using a 3-gram cutoff, the resource drops to 5.6 million tonnes at 5.72 grams gold, or 1.04 million contained ounces.

Anglo’s estimate is more conservative: 8.1 million tonnes grading 3.44 grams gold, using a 1 gram cutoff and a minimum width of 4 metres.

Metallurgical tests indicate an overall gold recovery of 94% using bulk sulphide flotation, ultrafine milling, pressure oxidation and conventional cyanidation, with cyanide consumption of 0.4 kg per tonne. The highest copper grades are 0.5%, but, on average, the grade is an uneconomic 0.13%.

The structure is amenable to open-pit mining, and Pangea believes that, given the deposit’s high-grade core, there is an opportunity to develop an underground operation later on.

“With quite a bit of down-trend potential, Anglogold would prefer to add to reserves before contemplating a mine,” says Anglo American geologist Robert Theron, who notes that the deepest intersection so far has been at 280 metres.

• Golden Ridge — Pangea’s second advanced project in Tanzania is Golden Ridge, a 50-50 joint venture with Johannesburg-based Randgold Resources, which serves as operator.

  Randgold acquired a half-interest by spending US$5 million on the property and can boost its stake to 65% by completing a bankable feasibility study and securing project financing by September 2000.

  The property, situated 100 km south of Mwanza, contains three BIF-hosted gold zones: Nyaligongo, Hill 4 and Hill 5. Of these, the north-southerly trending Nyaligongo Main zone hosts the bulk of the gold resource. Here the geology is characterized by stratabound, sulphide-replacement gold mineralization combined with swarms of high-grade, gold-bearing quartz veins.

  Randgold estimates the total resource in these three areas to be 37 million tonnes grading 1.4 grams gold, or 1.67 million contained ounces. Measured and indicated resources at Nyalingongo and Hill 5 are pegged at 8.1 million tonnes grading 2.4 grams gold, equivalent to 620,000 contained ounces.

  Randgold’s feasibility study envisions two approaches to mining, each of which would produce 60,000 oz. gold annually: an owner-operated open-pit mine with a capital cost of US$35.8 million and a cash cost of US$217 per oz.; and a contract-mining operation with capital and cash costs of US$22.3 million and US$241 per oz., respectively.

  Randgold has decided, however, that Golden Ridge does not meet its criterion for investment; it intends to sell its interest in favour of developing more advanced gold projects in Mali.

  Pangea has made at least two offers for Randgold’s half, but so far the South African miner is holding out for competing bids. “There is a host of mid-sized companies that would like to come in and mine this thing,” says Anton Esterhuizen, Pangea’s exploration manager in eastern and southern Africa, who notes that the Tanzanian government is anxious to see some kind of development at Golden Ridge before next year’s national election.

  At the nearby Siga Hills deposit, also equally owned by Pangea and Randgold, gold mineralization has been trenched in a brecciated and sulphidized BIF, exposing the structure over a 900-metre strike length. The work has resulted in assays of up to 21 grams gold per tonne over 5 metres and 7.7 grams gold over 10 metres.

• Tulawaka — Pangea has a 70% interest in the Tulawaka project, which is in a more remote portion of the inner belt, some 160 km southwest of Mwanza. Montreal-based Explorations Minieres du Nord (MDN-M) owns the remainder.

  Pangea discovered Tulawaka, a blind target in a forested area, through the use of soil surveys, pitting and shallow rapid-air-blast (RAB) drilling.

  More recently, the company carried out a 3,073-metre program of reverse-circulation drilling that confirmed and extended two gold zones, named East and West, that occur in a sheared felsic intrusive. The drilling returned several high-grade assays, including 145.27 grams gold over 5 metres.

  The East zone has been traced over a 600-metre strike length and remains open at depth and to the northwest. Gold mineralization is associated with quartz-tourmaline veins and minor sulphides.

  Pangea’s work indicates that the East zone is intersected by northeast faults, with block-faulted segments of the main vein having an average strike length of 300 metres with an apparent displacement of up to 90 metres.

  The West zone has been traced over a 750-metre strike length and is open in all directions. Mineralization is associated with disseminated sulphides, with occasional quartz stringers and narrow quartz veins.

  “It’s a big system and an exciting system, and we think we may have something,” says Esterhiuzen.

  Past drilling reached depths of 50 metres, and the next phase will aim to extend mineralization to 150 metres and close the drill spacing to 50-metre intervals. With additional drill results, Pangea expects to be able to release a resource estimate before year-end.

  Pangea shares another joint venture with Explorations Minieres in Tanzania: the early-stage Kanegele project, southwest of Golden Ridge. Shallow drilling here has yielded up to 7.5 grams gold over 15 metres, and more drilling is planned for 1999.

• B
  ulyanhulu South — Immediately south of, and on-strike from, Sutton Resources‘ (STT-T) Bulyanhulu deposit [currently being acquired by Barrick Gold (ABX-T)], Pangea is exploring the 260-sq.-km Bulyanhulu South property, which is joint-ventured with Ashanti Goldfields (AHD.U-T).

  Ashanti can earn a 51% interest by spending US$4 million; it can boost this to 60% by completing a bankable feasibility study by October 2000 and arranging all development funding.

  To date, the partners have identified a 1-km-long target that has produced trench assays of 9.5 grams over 12 metres. The zone will be drilled in the first half of this year, and several other targets on the concession warrant further work.

  Pangea’s Rubondo properties, which include the Sheba, Igando and Kakindu projects, are also joint-ventured with Ashanti, which can earn a 51% interest by spending US$3 million. Work at Kakindu has been held up by an influx of 250,000 illegal artisanal miners, who have been removed twice by Tanzanian authorities. Once the problem is solved, a 9,000-metre RAB drill program will begin testing anomalies and identifying host rocks.

• Mgusu — At the Mgusu gold property, 100 km southwest of Mwanza near Geita, Pangea has a formed a joint venture with Dublin-based Ormonde Mining. The latter must spend US$2.6 million over three years to earn a half-interest.

  Drilling to date has identified 1.8 million tonnes grading 4.6 grams gold, or 271,000 contained ounces, to a depth of 100 metres. This resource represents only one of four mineralized structures identified.

  The Mgusu reef area will undergo infill drilling in early 1999 under Ormonde’s supervision.

• Suguti/Ushirombo — Pangea’s Suguti and Ushirombo gold projects, joint-ventured with South African steelmaker Iscor, are in a state of limbo, owing to Iscor’s decision to leave Tanzania. Iscor can earn a 35% or 51% interest in either Suguti or Ushirombo by spending US$3 million or US$5 million on exploration.

  While Pangea’s primary focus is Tanzanian gold, the company is also exploring deposits in Peru, Canada and Kenya.

• Peruvian projects — Pangea’s two projects in Peru — Victoria, north of Lima, and Huancavelica, 400 km southeast of Lima — have both undergone drilling.

  Victoria is shared equally with Rouyn-Noranda-based Sundust Resources (SUN-M). However, if Sundust continues to be in arrears with its contribution, Pangea’s share may increase to 70%.

  The deposit is a classic epithermal gold-silver-copper target, with 1.92 million tonnes grading 6.56 grams gold, 53.72 grams silver and 1.01% copper delineated to a depth of 260 metres. Several other veins have been discovered recently and Pangea believes there is potential to develop the deposit further.

  Huancavelica is joint-ventured with Rio Tinto (RTZ-N), which can earn a 55% interest by spending US$4.3 million. That company, having already made a significant copper-gold discovery on its adjacent property, is carrying out drilling at Huancavelica and results are expected to be released soon.

• Fenn-Gibb — In the Timmins camp in Canada, Pangea shares the Fenn-Gibb joint venture with St Andrew Goldfields (SAS-T), which must spend $6 million to earn a half-interest. St Andrew owns a mill within trucking distance, and the partners are considering developing an open pit at Fenn-Gibb that ultimately would lead to an underground operation.
• Kenya — In coastal Kenya, Pangea retains a 20% net profits interest in five titanium-sands projects being operated by sister company Tiomin Resources (TIO-T). The most advanced project, Kwale, is the subject of a feasibility study which is expected to be completed by year-end.